Saturday, December 20, 2014

Pension Bill: Measure Permits Multiemployer Funds to Reduce Benefits, Which Could Open Door to Moves in Other Troubled Programs

A measure included in Congress’s mammoth spending bill permits benefit cuts for retirees in one type of pension plan, a big shift that lawmakers and others believe could set a precedent for other troubled retirement programs.
The legislation is aimed at defusing a potentially explosive problem—the deteriorating condition of what are known as multiemployer plans, jointly run by unions and employers.
The bill cleared by the Senate late Saturday would allow troubled funds to cut benefits for current retirees in some circumstances. That is an exception to a long-standing federal rule against scaling back private-pension benefits.
Lawmakers and experts, while divided over the merits of the change, largely agreed that it could well be the first of many. 
The measure “would set a terrible precedent,” said Karen Friedman, executive vice president of the Pension Rights Center, a group that advocates for wider pension coverage and opposes benefit cuts. The bill could encourage similar cutbacks in troubled state and local pension plans, and possibly even Social Security and Medicare, she said.
Some conservatives contend the bill would encourage policy makers to recognize and deal with shortfalls in benefits programs.
“Facing up to the insolvency is healthy,” said Alex Pollock, a scholar at the conservative American Enterprise Institute. While it is difficult to consider cutting retiree benefits, it is often better than taking the money from other people, such as taxpayers, he said.
Multiemployer plans are jointly administered by unions and employers and are funded by multiple employers in a given industry, typically in fields such as trucking, retail and construction. There are about 1,400 plans in all, covering roughly 10 million people. Because of declining ratios of active workers to retirees, and loose funding standards, some of the larger plans, such as the Teamsters’ Central States fund, are in dire financial condition.
The failure of just a few of these plans quickly would bankrupt the federal pension safety net. The safety-net agency, the Pension Benefit Guaranty Corp. recently widened its projected long-term deficit for multiemployer plans to $42 billion.
Read the rest of the story HERE.

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